J.D. Knox Group v. New London Trust

• Court: District Court, D. New Hampshire
• Decided: April 9, 1998
• Docket: CV-97-527-SD
• Status: Published

Opinion

J.D. Knox Group v. New London Trust CV-97-527-SD 04/09/98 UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

J.D. Knox Group, Inc.; Joseph D . Knox, individually and d/b/a The J.D. Knox Group

v. Civil No. 97-527-SD

New London Trust, FSB

O R D E R

This diversity action arises from the relationship between

plaintiffs Joseph D. Knox and The J.D. Knox Group and defendant

New London Trust. Plaintiffs allege that defendant bank

contractually agreed to process a Small Business Administration

(SBA) loan for the plaintiffs, and, if the loan application was

denied, to provide alternative funding. Plaintiffs' suit alleges

that defendant breached this contract, breached its fiduciary

duty, negligently failed to process the SBA loan, and committed

negligent and intentional misrepresentation.

Presently before the court is New London Trust's motion to

dismiss based on, inter alia, the statute of limitations, to

which plaintiffs object. Background

_____ Joseph Knox, sole proprietor of The J. D. Knox Group,

developed a laser color recorder (LCR), which he intended to

market. To provide capital for this endeavor, Knox requested a

credit line from defendant. Knox discussed his business plans

with Charles Sebring, Senior Vice President of New London Trust,

and Scott Walters, the bank's Vice President. Sebring and

Walters told plaintiff that he would qualify for an SBA loan.

Defendant provided Knox with a home equity loan of $125,000,

secured by his Lake Sunapee home, which Knox saw as interim

financing to fund his project until an SBA loan could be secured.

Plaintiff completed the SBA loan application and forwarded it to

New London Trust during the first week of 1992. Between January

and May of 1992, plaintiff met with Walters on a number of

occasions to provide information needed for the SBA loan

application. Walters continued to assure Knox that the SBA

application process was proceeding. Walters also told Knox that

if the SBA did not approve the loan. New London Trust or a

partner bank in Keene, New Hampshire, would finance his business.

During April and May of 1992, Knox began to worry about

the lack of progress on the SBA loan. Plaintiff spoke with

individuals from other financial institutions, who advised that

there must have been something wrong with the application because

the SBA generally took from four to six weeks to issue a decision. During a May 1992 meeting with Walters, Knox learned

that Walters had become annoyed with the SBA lending officers and

had walked out of a meeting with them. Later in May, Knox

learned that the SBA had still not received a complete

application package from New London Trust.

In 1992, after learning of the problems with the SBA loan,

plaintiff requested a meeting with the president of New London

Trust. Knox requested assistance from the bank and was advised

that the bank would not provide financial assistance. Knox then

met with Sebring on June 23, 1992, and expressed his concern

about how the SBA loan application was being handled. Knox also

informed Sebring that his business would suffer irreparable harm

if the bank did not provide funding as promised by Walters.

Plaintiff requested that the bank provide a $750,000 loan in

place of SBA financing; however, Sebring flatly refused to

consider the loan. On June 24, Knox sought to increase his line

of credit, and Sebring agreed to offer him a $160,000 loan.

After New London Trust's failure to offer the $750,000 loan,

plaintiffs' business was adversely affected by the lack of

financing, and Knox considered filing bankruptcy.

During this period, Knox had been negotiating with Bremsom

Data Systems regarding marketing plaintiffs' LCR. Knox reached

an agreement by which Bremsom issued a purchase order for twenty-

five LCR units at a total purchase price of $1,650,000. However,

3 due to a lack of financing, plaintiffs were unable to provide an

LCR unit for exhibition in the Bremsom booth at a trade show in

November 1992. This failure caused Bremsom embarrassment and

precipitated termination of the relationship between plaintiffs

and Bremsom.

In 1993 Knox began discussing borrowing additional money

from New London Trust. As a result of these discussions. New

London Trust agreed to lend plaintiffs $135,000 in exchange for

the plaintiffs' agreement to a release which purported to

discharge New London Trust from any liability arising from its

relationship with plaintiffs.

On October 17, 1997, Knox commenced the present action

seeking to recover for breach of contract, breach of fiduciary

duty, negligence, and negligent and intentional

misrepresentation.

Discussion

1. Standard of Review

When a court is presented with a motion to dismiss filed

under Fed. R. Civ. P. 12(b)(6), "its task is necessarily a

limited one. The issue is not whether a plaintiff will

ultimately prevail but whether the claimant is entitled to offer

evidence to support the claims." Scheuer v. Rhodes, 416 U.S.

232, 236 (1974). A motion to dismiss pursuant to Rule 12(b)(6)

4 requires the court to review the complaint's allegations in the

light most favorable to plaintiff, accepting all material

allegations as true, with dismissal granted only if no set of

facts entitles plaintiff to relief. See, e.g., Scheuer, supra,

416 U.S. at 236; Berniger v. Meadow Green-Wildcat Corp., 945 F.2d

4, 6 (1st Cir. 1991); Dartmouth Review v. Dartmouth College, 889

F.2d 13, 16 (1st Cir. 1989). When defendants assert in a motion

to dismiss that an action is barred by an affirmative defense

such as the statute of limitations and the face of the complaint

reveals that the action is so barred, the complaint must be

dismissed. See Aldahonda-Rivera v. Parke Davis & Co., 882 F.2d

590, 592 (1st Cir. 1989); DiMella v. Gray Lines of Boston, Inc.,

836 F .2d 718, 719-20 (1st Cir. 1988).

2. Statute of Limitations

All of plaintiffs' claims are governed by New Hampshire

Revised Statutes Annotated (RSA) 508:4, which states, "all

personal actions . . . may be brought only within 3 years of the

act or omission complained of . . . ." With one exception, all

of the conduct referenced in the instant complaint occurred more

than three years before the filing thereof. The only conduct

mentioned on the face of the complaint that occurred within three

years of the complaint was New London Trust's demand for a

$50,000 payment in the first quarter of 1995. Although

5 plaintiffs allege that this demand caused damages, this demand

does not form the basis for any of the counts in the complaint

and does not appear to violate any legal duty. Indeed, the

letter that plaintiffs point to as embodying the intent of the

parties provided that the loan would be payable in full on or

before March 15, 1994. See Exhibit 1 attached to Plaintiff's

Objection to Defendant's Motion to Dismiss.

Despite the fact that all of the conduct referenced in the

complaint occurred between 1991 and 1993, plaintiffs now argue

that the breach of contract and fiduciary duty did not occur

until 1997, when Knox received a letter rejecting a funding

proposal. See Plaintiff's Opposition to Defendant's Motion to

Dismiss at 9. This argument, however, contradicts the complaint,

which alleges breach of contract and fiduciary duty based upon

defendant's flat refusal to consider lending plaintiffs $750,000

in place of the SBA loan in 1992. See Complaint 5 28. And it is

the complaint alone upon which the court must base its decision

on a Rule 12(b)(6) motion. See Aldahonda-Rivera, supra, 882 F.2d

at 592.

Although breaches of two separate contractual duties can

give rise to two independent causes of action, this is clearly

not such a case. Plaintiffs do not allege that two independent

contractual duties were breached. The complaint clearly alleges

that defendant "breached its contractual warranties and

6 agreements with the plaintiffs by failing to provide funding as

agreed . . . Complaint 5 49. The only factual averment in

the complaint supporting this assertion is the allegation that

defendant failed to provide funding in 1992. Thus the court

finds that on the face of the complaint plaintiffs' breach of

contract and fiduciary duty claims are barred by the statute of

limitations.

Although plaintiffs acknowledge that the conduct upon which

the negligence and misrepresentation claims are based occurred in

1992, they allege they did not suffer damage until 1997. Thus

plaintiffs argue this action is not barred because the statute of

limitations provides, "when the injury and its causal

relationship to the act or omission were not discovered and could

not reasonably have been discovered at the time of the act or

omission, the action shall be commenced within 3 years of the

time the plaintiff discovers . . . the injury . . . ." RSA

508:4. This argument again, however, contradicts the complaint.

According to the complaint, on June 23, 1992, Knox communicated

to the defendant "his deep concern with the manner in which Mr.

Walters had handled the SBA loan application and the resulting

damage to the plaintiff. ..." Complaint 5 27. Thus the

complaint reveals that Knox knew in 1992 that he had sustained

damages. Furthermore, the statute of limitations begins to run

when the plaintiff is aware he has suffered some damage, even

7 though the full extent of damages may not be known. See Rowe v.

John Deere, 130 N.H. 18, 23, 533 A.2d 375, 377-78 (1987).

Finally, plaintiffs seek to avoid the statute of

limitations' effect by invoking the doctrine of equitable

tolling, under which courts will lift the bar of the statute of

limitations if necessary to serve the interests of justice.

Generally, in cases where equitable tolling has been held

appropriate, the defendant's affirmative misconduct caused

plaintiff to delay filing a timely claim. See, e.g., Lakeman v.

LaFrance, 102 N.H. 300, 303, 156 A.2d 123, 126 (1959). There is

no evidence that this is the case here. Although plaintiffs now

allege they "were induced by the conduct of the defendant in not

filing a lawsuit," the facts belie this contention. Plaintiff's

Memorandum in Opposition to Defendant's Motion to Dismiss at 10.

For instance, the complaint alleges that New London Trust refused

to provide alternative financing in 1992, but plaintiffs now

argue that New London Trust continued to assure plaintiffs that

it would provide alternative financing. Furthermore, the parties

signed a release which purported "to terminate and fully resolve

any and all differences or disputes that presently exist or might

potentially exist between NLTC and Knox, including without

limitation any and all differences or disputes arising out of . .

. any . . . representations, guaranties, or other statements,

whether in writing or orally, between the parties prior to the

8 date of this Agreement . . . ." Exhibit C attached to

Defendant's Motion to Dismiss. Although plaintiffs argue that

the release was not binding, at minimum, it evinces an intent on

New London Trust's part to disavow any obligations to the

plaintiffs. Thus the court finds Knox's claim that he continued

to believe New London Trust intended to provide him funding

incredible, and inconsistent with the complaint.

Conclusion

For the abovementioned reasons defendant's motion to dismiss

(document 4) is hereby granted.

SO ORDERED.

Shane Devine, Senior Judge United States District Court

April 9, 1998

cc: William E. Aivalikles, Esq. W. Scott O'Connell, Esq.